Daimler sees slower growth in 2016 as China cools

By Edward Taylor

STUTTGART (Reuters) - Daimler AG (DAIGn.DE) expects slower sales growth for its Mercedes-Benz cars in China this year after a surge in demand in 2015 that helped the automaker post record sales and earnings.

The German company proposed its highest ever dividend of 3.25 euros per share for 2015, but said on Thursday it expected revenue and earnings before interest and tax (EBIT) from its ongoing business to increase only slightly in 2016. That compared with its 2015 guidance for "significant" growth.

"Outlook 2016 came in below market expectations," DZ Bank analyst Michael Punzet, who has a hold rating on Daimler shares, said in a note.

The stock was down 4.4 percent at 60.21 euros by 0915 GMT, its lowest in more than a year and underperforming Germany's blue-chip DAX index, (.GDAXI), which was up 0.2 percent.

"The growth rate in China will be more moderate this year," Daimler said about its most profitable division, Mercedes-Benz Cars, which saw sales jump 41 percent in China, its biggest market, in 2015.

Daimler Chief Executive Dieter Zetsche said it would be wrong to classify the company's China outlook as disappointing.

"We look positively into the year in China. The market forecast is for 8 percent growth and we believe we can achieve market share gains," he said.

Daimler had lagged competitors in China, a factor which helped it enjoy exceptional growth after Mercedes-Benz found a winning formula by taking the brand further upmarket and started to build C-Class and GLA compact cars in Beijing.

Going forward, Mercedes faces increased competition. Its S-Class limousine is now contending with a new BMW 7 series and the Mercedes GLA offroader is being chased by BMW's new X1.

In 2015, Mercedes-Benz Cars saw its return on sales increase to 10 percent from 8.1 percent a year earlier, helping to lift group results.

Daimler's EBIT from ongoing business rose 36 percent to 13.81 billion euros in 2015, just shy of the 13.84 billion euros forecast in a Reuters poll, helped mainly by a 23 percent jump in ongoing EBIT at Mercedes-Benz Cars.

Analysts at Evercore ISI said Daimler had flagged lower-than expected currency tailwinds for 2016.

Exchange-rate effects boosted EBIT by 900 million euros in 2015, and are expected to have a positive impact of around 400 million in 2016, Chief Financial Officer Bodo Uebber said.

(Editing by Victoria Bryan and Mark Potter)